Cut in inter-connection usage charges: All but one mobile operator upset with TRAI norms

Industry estimates are that the revenues of Airtel, Idea and Vodafone could jointly be impacted to the the tune of Rs 4,800 crore.

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BENGALURU: A day after the telecom sector went into a tizzy over the decision to sl­ash inter-connection usage charges (IUC), industry estimates are that the revenues of Airtel, Idea and Vodafone could jointly be impacted to the the tune of Rs 4,800 crore.

On Tuesday, the Telecom Regulatory Authority of India cut the IUC — the charge paid by telcos for mobile calls made by their customers to networks of other operators — from 14 paise to 6 paise starting October 1. By January 1, 2020, the regulator plans to phase out IUC.

Even as incumbent players Bharti Airtel, Idea Cellular and Vodafone voiced disappointment with the decision, analysts said the one operator that would benefit was Reliance Jio. “Jio will be the biggest beneficiary of the IUC rate cut. It remains to be seen if it passes the benefit to consumers as cheaper tariffs or reinvests that back into the business,” says a report by Bank of America Merrill Lynch.
In the first quarter of 2017-18, the interconnect costs for RJio was Rs 21 billion. With RJio bundling free voice calls with paid data in many packages, there is more traffic from RJio phones to other service providers than the other way round. The cut in IUC means RJio will have to pay them much less.
A senior company executive said RJio could use potential savings to improve its coverage from the current 1.2 lakh towers to 16 lakh towers and eventually to 20 lakh towers. It would also try to improve its service and reduce call drops, he suggested.

Sanjay Kapoor, former CEO of Bharti Airtel, said incumbent players would continue to bleed till the traffic from RJio to their networks balances out. They would also have to upgrade their networks to VoL­T­E, a technology that speeds up da­ta travel and improves voice quality, to reduce cost.”They need move to an IP network if they want to keep consumers happy and also reduce the impact of IUC,” said Kapoor.
With revenues likely to be hugely impacted, the incumbent operators have decided to move court. “We do not have a choice. Our point and co­n­cerns were raised at various meetings... now the members have decided to move court,” said Rajan Mathews, director gene­ral, Cellular Operators Association of India.
In a statement late in the evening, RJio said IUC should have been ph­ased out in 2011 itself. “It’s wrong to as­sume that we will benefit from the reduction in IUC.”